Boeing is compensating Southwest for the 737 Max grounding, and the airline is sharing $125 million of the agreed total with employees
- Southwest reached a confidential agreement with Boeing for compensation over the ongoing 737 Max grounding.
- The airline did not disclose the total, but said that $125 million would be shared with employees in a profit sharing program.
- Southwest, which currently has the world's biggest 737 Max fleet, said that it's in continuing talks with Boeing for additional compensation.
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Southwest Airlines said on Thursday it had reached a confidential compensation agreement with Boeing for a portion of projected financial damages related to its 737 Max aircraft grounding.The US airline also said it would share the proceeds from Boeing with its employees. The world's largest 737 Max operator expects the profit sharing accrual to be about $125 million.
Southwest, American Airlines, and United Airlines are scheduling flights without use of the aircraft until early March 2020, nearly a year since the plane was grounded after crashes killed 346 people in Indonesia and Ethiopia.American and United both remain in discussions with Boeing about compensation. American has 24 Max aircraft in its fleet and had expected 40 by the end of 2019. American has said it expects to be compensated for lost revenue from the grounding.
"The missed deadlines and extended grounding have hurt our customers, our team members and our shareholders," American spokesman Ross Feinstein said on Thursday. "We are working to ensure that Boeing's shareholders bear the cost of Boeing's failures, not American Airlines' shareholders."United declined to comment. Boeing took a nearly $5 billion after-tax charge in the second quarter for expected compensation to airline customers with grounded planes. However, the total cost of customer compensation may be higher, because most agreements have not yet been negotiated, and the grounding is ongoing.
On Wednesday, Federal Aviation Administration chief Steve Dickson confirmed the agency will not unground the 737 Max before the end of 2019. As recently as November, Boeing had forecast that the plane would be cleared to fly by year's end.
With the Max parked, Southwest has scaled back growth plans and canceled more than 100 daily flights, wiping $435 million from its earnings between January and September.Southwest had 34 Max jets in its fleet when global regulators grounded the aircraft in March, the most of any US airline. The airline was supposed to receive 41 more 737 Max planes in 2019, but most of those deliveries are now scheduled for 2020.
In October, the Southwest Airlines Pilots Association filed a lawsuit against Boeing alleging the Max grounding caused over $100 million in lost wages.
Federal officials told Reuters earlier this week the FAA is not expected to authorize the plane to fly until January at the earliest, citing significant work still to be done. Some US officials think it may not be until at least February that Dickson gives the green light.Get the latest Boeing stock price here.
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